By EWN • 11 January 2023 • 15:25
Today we are looking for side income in the most profitable securities of foreign companies. Read on to see how to find the best-yielding dividend stocks and what the risks are.
First, let’s look at stocks that have already passed the dividend cut-off. The cut-off is the point before which you have to buy a share to receive a payout.
In January 2022, there were cut-offs for several large companies, of which below we list 10.
The period between the cut-off date and the day the shareholder is entered into the register is two trading days. That is, you can become a shareholder for just a couple of days by selling shares after receiving the right to a dividend.
For all the companies presented in the list, payments usually occur on a quarterly basis. For example, AT&T paid $0.52 per share in January, which was worth $26.1 that day. It’s only 2%, but for three months. In total, four quarters will bring the same 8% per annum. It is similar to how interim payments on deposits take place: at the annual rate, but in instalments.
The exception to this list is the Realty Income Fund, which pays monthly. Its 25 cents per share must be multiplied by 12 and then divided by the share price to calculate the annualised return. It turns out to be more than 4% per annum before tax. From the funds, they take a tax of 30% in favour of the state, so in reality, investors will receive less than 3% per annum.
Here, we have listed 10 stocks for which payments with the highest yield are to come in upcoming months.
The shortest period between the cut-off date and the expected payout date is with the French oil and gas giant Total. No more than 11 days must pass from the last day of the purchase for the company to transfer the money. The payout is fixed in euros (66 cents), but in the US this company is traded in dollars, so the yield may fluctuate slightly following the EUR/USD rate.
Although these may look promising, don’t be in a hurry to buy stocks with the highest rates and reject those with lower ones. As with deposits and any investment in general, the rule works here: the higher the yield, the more potential risks. For example, rates are higher where stocks have recently fallen heavily, or have been falling for a long time before, or they have historically weak growth against the general background.
Another risk factor is currency. You can get a dividend at an inopportune moment. For example, as of the date of writing, the euro is worth $1.14, which means that 66€ cents will bring investors more than 75 US cents.
But imagine, when the company pays off, the euro falls to $1.10. The dividend will already be about $0.73, and the rate of return will be slightly higher than 4.9% per annum. If the euro, on the contrary, rises to $1.20, then the dividend will be $0.79, and the yield will be 5.4%. The difference is not huge, but it is still there.
There are also tax risks associated with exchange rates. You can earn 3% per annum in dollars, and the Tax Service will withhold about 10-15% of the profit from this; that is, the investor will receive 2.61% per year. But if the dollar has grown by 10% this year, and the stock has not added a cent at all, then the Tax Service will withhold another percent from the price difference. As a result, the investor will receive a little more than 1% in dollars on the amount invested, although their shares did not grow, and the promised rate was very good – 3% per annum.
Dividend shares are a good alternative to deposits, but you need to be prepared for increased risks and nuances. Rates on the most profitable shares, which can be bought in the next months for the next payments, range from 2% to 5.1%.
At the same time, it will take from one to five weeks to wait for the payment itself, and profitability is not guaranteed. First, a change in the stock price can either improve or worsen the bottom line. Secondly, the dynamics of the exchange rates of the euro, and dollar can affect the amount of the payment.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when spread betting and/or trading CFDs. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
In association with cmcmarkets.com
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